Cardinal Resources plc
06 November 2007
CARDINAL RESOURCES PLC POSTS EGM CIRCULAR TO SHAREHOLDERS
LONDON - Tuesday, 6 November 2007
Cardinal Resources plc (AIM:CDL) ('Cardinal' or 'the Company'), an
independent oil and gas exploration and production company operating in
Ukraine, today mailed a circular to shareholders to notify them of an
extraordinary general meeting ('EGM') to be held at 10:00 am on the 30
November 2007 at the offices of Fox Williams LLP, Solicitors, Ten Dominion
street, London EC2M 2EE.
The circular addresses the following issues:
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• Capital reorganisation and reduction of share capital
• Increase in borrowing powers
The directors of Cardinal (the 'Directors') have been reviewing the
existing capital structure and believe that it is in the best interests of
the shareholders of the Company (the 'Shareholders') and the Company as a
whole to effect a reorganisation and reduction of the share capital of the
Company.
The Company confirms, following the announcement on 30 October 2007, that
pursuant to the terms of a framework agreement for the potential sale of
its Ukrainian assets (the 'Transaction'), the Company is working toward
signing a share purchase agreement ('SPA') to effect the Transaction by 9
November 2007. However, there is no guarantee that the SPA will be
executed, or, if it is executed, that the Transaction will be approved by
Shareholders at a further extraordinary general meeting to be convened for
that purpose.
The Directors believe that a reduction of share capital and an increase in
the borrowing powers of the Directors would increase the number of options
available to the Company, including providing for the flexibility to raise
additional equity/debt financing as opportunities become available should
the Transaction fail to complete and/or to successfully execute the post
Transaction investing strategy of the Company.
Capital reorganisation and reduction of share capital:
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For the Company to have the flexibility to consider and conduct equity
fund-raising initiatives at a price available in the market, without being
restricted to a price of not less than 20p which is the current nominal
value of the Company's ordinary shares (the 'Ordinary Shares'), the
Directors are of the opinion that the nominal value of the Ordinary Shares
needs to be reduced below its market value, which at the time the Ordinary
Shares were suspended from trading on AIM, was 7p.
Although the capital reorganisation will have the result of creating a new
distributable reserve, the purpose of the capital reorganisation is to
reduce the nominal value of the Ordinary Shares to facilitate the
possibility of equity fund-raising.
Increase in borrowing powers:
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The Directors believe that it is in the best interests of the Company to
reduce the restrictions on the borrowing powers of the Directors currently
imposed by the articles of association of the Company (the 'Articles of
Association') which, due to ongoing declines in the Company's adjusted
capital and reserves, cap the borrowing powers of the Directors at £20
million.
Given the Company's immediate need for liquidity, the Directors believe
that it is in the best interests of the Shareholders and the Company as a
whole to reduce the restrictions on the borrowing powers of the Directors
and therefore propose an amendment to the Articles of Association to
increase the Directors' borrowing powers to the greater of £40 million and
4.5 times the Company's adjusted capital and reserves. The Directors also
believe that this change will facilitate any future negotiations with the
Company's chief creditor Silver Point Capital ('SPC'), failing completion
of the Transaction, to restructure SPC's outstanding financing to the
Company and the Company's efforts to attract new equity funding for the
business through a rights offering, open offer or private placement.
The recommendation:
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The circular contains a recommendation by the Directors to Shareholders to
vote in favour of the resolutions to be proposed at the EGM as the
Directors have irrevocably undertaken to do in respect of their aggregate
shareholding of 2,066,924 Ordinary Shares, representing 1.8 per cent of
the issued ordinary share capital of the Company at the date of this
document.
A copy of the EGM Circular sent to shareholders is available on the
Company's web site: www.cardinal-uk.com in accordance with the AIM rules.
For further information please contact:
Cardinal Resources Conduit PR Ltd
Charles Green / Natalia Egorova Jonathan Charles
+44 (0) 20 7936 5250 +44 (0) 20 7429 6666
investor.relations@cardinal-uk.com Jonathan@conduitpr.com
Notes to Editor
Cardinal Resources plc is an independent oil and gas company engaged in
the acquisition, development, production and exploration of oil and
natural gas properties in Ukraine. Cardinal is an experienced operator in
the country focused on expanding its existing operations through the
farm-in or acquisition of additional upstream oil and gas assets that can
be further developed through the application of modern technology and
expertise.
This information is provided by RNS
The company news service from the London Stock Exchange